A significant event is set to take place next month to inject momentum into the transition. Orchestrated by the Power Industries Council (EIC), it will address why globally, the pace of net zero has stagnated and how to initiate rapid acceleration if we are to achieve our objectives.
Stuart Broadley, the CEO of EIC, conversed with ELN to explore the factors hindering numerous clean technology projects from reaching Final Investment Decisions (FID), where funds are actually committed to make things happen.
The launch of the carbon capture hub in the North East exemplifies this; funding is beginning to flow into new nuclear initiatives including fusion research, yet we remain at a stage where, despite the UK’s significant progress, we experience delays in bringing clean technology to market.
Globally, there are still far too many FIDs for new fossil fuel plants, even with all the policies introduced to facilitate the transition. So, why are companies and markets hesitant to invest in green technology?
Stuart’s response to this inquiry is straightforward…
Why do companies invest? They don’t invest because the policy states to invest. They invest because they recognize the business opportunity. Thus, the fundamental issue with net zero at this moment is the inadequate flow of activity from the policy landscape to order intake.
“This government, along with numerous governments worldwide, must unlock the potential by effectively advancing projects to the final investment decision.
Globally, we are producing and utilizing more coal, oil, and gas than at any other time in history. Therefore, although we have these very ambitious net zero targets, a significant portion of the funding is not directed there yet; it continues to flow into the hydrocarbon sector. Thus, one must inquire, what’s going wrong?”
“It’s because it’s not financially viable; most of these renewable projects are not lucrative enough for investors and developers to proceed. The policies are in place, that’s fine. However, ultimately, you need to align all stakeholders in the value chain for these projects to progress.”
So, who is accountable for this?
“That’s the challenging work for government right now. And you know, when governments are rapidly altering policies, it’s tough for any of those key stakeholders to understand what’s coming next.”
The next area is clearly finance; how do you persuade financial institutions to invest in clean technology?
“That boils down to return on investment, doesn’t it?
“When you look at the renewable projects currently, let’s consider those in Western Europe; you could also evaluate it on a global scale. Where does the technology originate? Right. So, what are we discussing? Solar PV that primarily comes from China, EVs which are increasingly dominated by China.
“Then we turn our attention to offshore and onshore wind, which has been dominated by Western European manufacturers, and they too are facing challenges in competitiveness. Hence, we reach a kind of decision point.
“Do we also need to embrace Asian and Chinese technology to genuinely rejuvenate the return on investment?
It’s not about policy. It’s not about supply chain capabilities. It’s really not about what’s the easiest thing to do. It’s about whether key players can generate profit from it.
“I’m uncertain how to remedy that until we see real funding start to flow.”
The EIC is striving to stimulate this by organizing a conference named Bankable Energies next month in the City of London. The objective, according to Stuart, is to gather key stakeholders and reach a point where investors can collaborate with suppliers and politicians, thereby increasing momentum.
“The funding needs to yield results. Simply put, that’s bankability. How do you make a major net zero project profitable, to be bankable? This means that all stakeholders recognize the value in investing time and resources into it and trust that the policy won’t suddenly flip again and change.
“That’s what this event is focused on, as we are aware from the data we have about final investment decision rates across all net zero technologies, covering all renewable technologies including onshore wind, offshore wind, solar, as well as new nuclear technologies and the liquid technologies like SAF, biogas, biofuels, and, of course, carbon capture and hydrogen, that all these sectors currently represent only about 5% of global projects announced that are actually at FID. Just 5%.
“How does that compare to oil and gas? That stands at around a 40% FID rate.
“Thus, we believe it’s time for a high-level forum to unite all the stakeholders – policy makers, developers, the finance community, the supply chain, the regulators – to determine what the 20 or 30 key net zero projects are that are stalled and how can we assist them?
“I’m not aware of any event that has undertaken this before, focusing purely on unlocking opportunities.
“We all understand the issues. Let’s come together and tackle the challenges.”
The event is scheduled for February 26-27.
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